v2.77a - Textured object not updating when manually changing UV coordinates
If you're using Cycles, you will also have to have the image mapped to a material node (like a diffuse or something) before it will show up properly in the Viewport.

Try setting up the material nodes the way they should be, and see if the texture updates better.

The other thing that might be causing this is if your texture is set to repeat. If it's repeating, then when you move a UV island outside the red area, it will still be red. It might be updating... you just can't tell.